Analysts at rating agency Icra said that the relief already extended to borrowers with loans up to Rs 2 crore has cost the exchequer an estimated Rs 6,500 crore.
YES Bank, ICICI Bank, Axis Bank and HDFC Bank accounted for the highest performa GNPAs among private banks.
The government may have to shell out up to an additional Rs7,500 crore on compound interest for loans of over Rs 2 crore, following the Supreme Court’s order directing it to make no distinction between small and large loans for reimbursement of compound interest.
Analysts at rating agency Icra said that the relief already extended to borrowers with loans up to Rs 2 crore has cost the exchequer an estimated Rs 6,500 crore. “As per our estimates, the compounded interest for six months of moratorium across all lenders is estimated at Rs 13,500-14,000 crore,” said Anil Gupta, vice president – financial sector ratings, Icra, adding, “With the announcement of waiver for all borrowers, the additional relief of ~Rs 7,000-7,500 crore will need to be provided to borrowers.”
It was not immediately clear whether the government plans to go through with carrying out the order or file for a judicial review. Tuesday’s order could mark the end of legal proceedings that began in mid-2020 after the Reserve Bank of India (RBI) announced a provision for loan moratorium for borrowers affected by the Covid-19 pandemic. The petitions had pleaded that borrowers who avail of the moratorium should not be charged penal interest, as opposed to the regular accrual of interest, as stipulated by the RBI.
The apex court also vacated the stay on recognition of new bad loans after August 31, 2020, meaning that banks and non-bank lenders could now see their asset quality ratios worsen. According to Icra’s estimates, on a proforma basis, the gross non-performing assets (GNPAs) of banks stood at Rs 8.7 lakh crore, or 8.3% of advances, as against the reported GNPA of Rs 7.4 lakh crore (7.1%) as of December 31, 2020. Also, on a proforma basis, the net NPA for the banking system stood at Rs 2.7 lakh crore, or 2.7% of advances, as against the reported NNPA of Rs 1.7 lakh crore (1.7%) as of December 31, 2020.
“Hence in absence of standstill by the Hon’ble Supreme court, the gross NPAs for the banks would have been higher by Rs 1.3 lakh crore (1.2%) and Net NPAs would have been higher by Rs 1 lakh crore (1.0%),” Gupta said. CARE Ratings said that of the `8 lakh crore proforma GNPAs in the banking system, public sector banks alone — eight of them — have reported a majority of the proforma NPAs at over Rs 6 lakh crore. Among all banks, the State Bank of India (SBI) reported the highest proforma GNPA at over Rs 16,000 crore, followed by Punjab National Bank (PNB), Union Bank of India and Canara Bank. YES Bank, ICICI Bank, Axis Bank and HDFC Bank accounted for the highest performa GNPAs among private banks.
There may be little cause for alarm, though, as most banks have been providing against unrecognised bad loans too, Care said. “Majority of the banks have kept aside extra provisioning for NPAs that may arise in future, or else the provisions would have been lower than reported in December 2020 (on Q-o-Q basis provisions increased from Rs 0.54 lakh crore in September 2020 to Rs 0.61 lakh crore in December 2020),” the agency said in a report.